Economists are busily adjusting their economic forecasts as a result of the tough measures taken by the Victorian government to try and put the lid on its COVID-19 outbreak.
Chief economist at consultants KPMG Brendan Rynne expects the stage four lockdown in Australia’s second largest state will see an $830 million economic output loss in August—a 2.5 percent decline.
September could be even worse, particularly if the construction sector runs out of work in the next four weeks.
“My calculations are about 130,000 workers now caught in Stage 4 are in work types that won’t be able to work from home,” Rynne told AAP.
Of these about 75,000 are in manufacturing, while there is possibly around 50,000 construction jobs that may end up not working by the end of the shutdown.
“Overall, Australia will have a shallower recovery than it would have done,” he said.
AMP Capital chief economist Shane Oliver expects Victoria’s decision will delay the return to positive economic growth in the December quarter.
“The further hit to the economy and likely additional upwards pressure on unemployment is increasing pressure for more policy stimulus,” Oliver said.
“While the RBA left monetary policy on hold at its August meeting further easing is likely ahead—it could take the form of a rate cut to 0.1 percent.”
The cash rate already sits at a record low 0.25 percent.
ANZ senior economist Catherine Birch had expected national unemployment would average eight percent in the September quarter, rising to 8.5 percent in the December quarter.
“On the face of it, weaker employment growth should result in higher unemployment,” she said in a note to clients.
“But how much higher the official unemployment rate will rise due to the tighter restrictions in Victoria remains unclear and subject to policy changes and movements in participation.”
Reserve Bank governor Philip Lowe predicts the jobless rate could reach 10 percent by year-end, although concedes it is difficult to make forecasts in the face of a pandemic.
This would be higher than the 9.25 percent forecast by the Treasury two weeks ago and prior to the tougher restrictions.
The Reserve Bank will release a range of scenarios for the economic outlook when it releases its quarterly statement on monetary policy on Aug 7.
Colin Brinsden in Canberra